by Ali James
The AARP suggests that people have a ‘nest egg’ equal to 10-12 times their usual income before retiring.
As the majority of us do not have near that figure available, generating income during retirement has become increasingly necessary.
Investing in real estate has long been recognized as a means to get ahead of the game and may be the key to enjoying a more fruitful retirement.
It may also allow you to live in different places at different times of the year.
Investing in Long-Term Rental Homes
A long-term rental property is one in which you intend to let the home to tenants for a period of one year or more. This arrangement has many positives from an investment perspective.
A longer lease gives you some stability as the owner and could have some tax advantages. You can reasonably expect a set amount of income to be generated over a set period of time.
In setting the terms you need to consider ongoing maintenance costs so that the rent amount you set will keep pace with those figures. Including a clause that allows for periodic rent increases is a safe strategy to protect your income against cost of living increases.
With a long-term rental home you need to consider any required modifications to the property such as making it accessible to those with mobility impairments.
This requires an outlay of funds, to be sure, but it may be necessary based on the type of property to rent and it can help with marketing the property as an accessible space for people with limited mobility that are seeking such properties.
The accessibility factor is all the more important if you plan to invest in a rental property in an area popular with retirees, whether within the USA (e.g. Florida, Arizona) or abroad, e.g. Costa Rica, Panama and Spain, to name just a few.
Related: Pros and Cons of Living in a Duplex
Holiday Rentals
The holiday let market is booming in places like the UK and is expected to continue to rise. Treated more like a hotel, holiday rentals host guests for anywhere from a few days to a few months at a time.
This option appeals to retirees with a travel bug. They can increase retirement income by renting their primary residence in this way while traveling or they can invest in a property in a foreign country and spend time away there when the property is vacant.
Income potential can be higher depending on location but of course, international investments comes with its own set of challenges and risks.
With long distance property ownership, a landlord should employ a local management company to see to the everyday maintenance and turn over of the home. This is a necessary additional expense that will bring you peace of mind and heightened security for your investments.
It will also be necessary to completely furnish the holiday rental including dishes, linens, and basic household necessities. This additional expense should be factored in when analyzing a property for income potential.
The cost of retirement is soaring everywhere. On top of careful planning to save enough while working, it is becoming necessary to secure an income during retirement.
Investment in real property, either for long term or holiday renting, is one method to secure that income and enjoy your retirement.